GREATER BOSTON�S 3Q NUMBERS BLEAK WITH A FEW BRIGHT SPOTS
Overall for the year to date, 2.7 million square feet of offices went back on the region�s 145 million square foot office market to bring the amount of available direct and sublease space up to 21.5 percent and rents down to an average of $30.62 versus $43 in 2000, according to Spaulding & Slye Colliers Research.
In Boston, where the average asking rent is $42.20, 834,828 square feet have been put back on the market since January. The city�s strongest sub-markets are Charlestown with an availability rate of 7.1 percent and South Station with 8.6 percent. The Financial District, which has traditionally boasted office addresses with the highest cache, has a surprising 15.1 percent availability.
Hit hardest by the slumping economy are the suburban locations. For the 76.4 million square feet between Boston and Rt. 495, the outer beltway, the availability is 26.4 percent (up to 30.1 percent in the northwest) with average asking rents at $23.71 and 2.3 million square feet put back on the market this year so far.
In Cambridge, the overall availability is 22 percent but in its Harvard Square sub market it�s only 7.5 percent and just 2.4 percent for direct lease space. The average asking rent is $32.94 and so far this year, 213,084 square feet has been absorbed, according to Spaulding & Slye.
The regional office market�s brightest spot � when factoring in rents, vacancies and the tenant fit-out investment - is the biotechnology laboratory niche in this city of 102,000 residents where Harvard University and the Massachusetts Institute of Technology are based. Since 1999, the supply of labs has more than doubled, from about 2 million square feet to 5.6 million with another 2.1 million square feet in development, according to the city development department. Rents range from the mid-$50�s to mid-$60�s and the total development cost of wet labs is usually at least $350 square foot.
In existing lab buildings, the direct vacancy rate is 3.8 percent, which rises to 5.1 percent when sublease space is included, said Stephen D. Lynch, Executive Managing Director of Insignia/ESG.
MIXED USE PROJECT GETS UNDERWAY IN LONG NEGELECTED NEIGHBORHOOD
The sale of $42 million in tax exempt bonds, the receipt of about $14 million in city loans and $2.5 million in private equity will enable construction to get underway on the first phase of Crosstown, an often delayed mixed use project. Located on the corner of Massachusetts Ave, and Melnea Cass Boulevard, the site straddles the struggling Roxbury and trendy South End neighborhoods. It is across the street from the Boston Medical Center, a Boston University research complex, a few minutes from Northeastern University and the Harvard Medical School with its constellation of stellar hospitals and research institutes.
Development partners Crosstown Associates and Corcoran Jennison plan to soon start construction on a 175-room Hampton Inn & Suites hotel, a 650-car garage and 22,000 square feet of retail. The 6.7-acre site is served by New England�s two major highways: the east/west Massachusetts Turnpike and the north/south Interstate 93.
BOSTON DEVELOPER BUYS NEW YORK BUILDING
The real estate investment trust Boston Properties purchased 399 Park Ave. for $1.06 billion. The tower is the headquarters for Citigroup, the seller, and sits between 53rd and 54th streets. This is the REIT�s sixth major Manhattan property.
BLACK & VEATCH LEASE
The global engineering and construction firm, Black & Veatch Corp. renewed for 5 years its 6,500 square foot lease downtown at 230 Congress St. James Topper and Chris Crooks of CRESA Partners represented the tenant and Yale Properties, the landlord, represented itself in the deal.
HARVARD PONIES UP, AT LEAST A LITTLE
In a turn around, Harvard University recently announced that it would boost its payment in lieu of taxes for an office complex that it purchased last year in neighboring Watertown, a blue collar town which worked for 12 years to redevelop the 30-acre site into its first office park. After more than a decade of planning, a $102 million federally funded toxic clean-up and infrastructure improvements, the town was tantalizingly close to realizing some property tax revenue from the parcel that was taken off its rolls by the federal government in 1816 for use as a U.S. military arsenal.
In May 2001, Harvard, which has a $19 billion endowment and owns18.6 million square feet of property in the region, purchased the 765,524 square foot Arsenal on the Charles office park for $162 million in cash. It then bundled the Arsenal with 50 acres of Boston property it purchased and obtained $247 million in low-cost financing through the Massachusetts State Development Agency in the form of taxable bonds.
For the office park, Watertown had anticipated collecting about $5 million a year in property tax. But, as a tax-exempt institution, Harvard may negotiate with municipalities voluntary payments in lieu of commercial property taxes and had offered $3 million. That would have �slowly bankrupt� the town, local officials said. They also noted that tax-exempt status was established in the 1830�s to help poor charities serve needy residents, a classification that doesn�t quite suit Harvard.
Then, last week, Harvard and Watertown agreed to an annual payment of $3.8 million on the 30-acre office park with a 3 percent increase each year. The pact, which Harvard President Lawrence Summers hailed as a �new Harvard principle� may have wider applicability. Cambridge officials have called �laughable� the school�s payment to their city of about $6 million for 215 acres it owns there.
More to come....
Engineered Systems leased 3,050 square feet of offices at Landmark One, 1 Van de Graaff Drive. Fred Scopa of Bostonia Realty repped for the tenant and Don Campbell of R.M. Bradley & Co. for the landlord, Cornerstone Real Estate Advisors.
SMMA/Symmes Maini and McKee Associates will do design work for the 100,000 square foot expansion of the Bose Corporation�s research facility at The Mountain Road here.